Crawling Road
The Permanent Portfolio, Investing, Finance and Random Thoughts.
Overseas Gold ETFs for Geographic Diversification
0There are several ETFs now that claim to hold gold overseas in places like Switzerland (or even closer in Canada). They are marketed as a way to get geographic diversification for gold holdings. There is even a spin that you can show up and pickup your gold. These are all marketing claims. Let’s talk about them.
Street Name
When you buy a stock/ETF it is held in the street name (another definition) of the broker, not your name. The idea that you’re going to show up in Zürich or Alberta and pick up your gold from an ETF before hitting the slopes is pure marketing. The chances that the fund operator is going to know it’s you that owns the shares is almost zero. The shares are almost all owned by brokerages in their name. The brokerage then keeps track in their own records who holds what. You’d have to work with your broker to get actual stock certificates issued in your name which is going to be a pain. Then there is the issue about showing up and proving your identity, etc.
The idea that you’re going to show up in Zürich or Alberta and pick up your gold from an ETF before hitting the slopes is pure marketing.
Where the Money is Really Kept
Also many people are not aware that funds that hold money in US dollars likely have those assets in US banks/brokerages even if based in another country. So the liquid cash assets are not outside of the US. The gold may be, but that’s it! There are plenty of ways the US govt. could put pressure on these ETFs to comply with repatriation orders, etc. You are not going to be protected from this kind of threat if that is what you think (not that it is likely anyway).
What Gold ETF is Best?
The ETF from the Canton Bank of Zürich (Zürcher Kantonalbak) under the ticker ZGLD is probably the “best” of the bunch. This is an ETF from a very well established Swiss bank with solid backing by the Canton of Zürich. It is operated under strict Swiss banking laws.
Now for the bad news…
This ETF is not available for purchase by Americans. You could jump through some hoops to get it on a foreign exchange, but this is a bad idea because of potential tax and other issues not being registered here. So even if you can buy it, you should be aware that it is strongly discouraged.
Now, if you are a non-US person in a foreign country then by all means buy ZGLD. It is probably the best of the Gold ETFs out there.
ETFs Have Similar Risks
Many of these ETFs have similar risks. They almost always use the same vaults, etc. to hold their gold in places like Switzerland, just the name is different. The Canadian ETFs (GTU and CEF) are exceptions as they hold it in Canada. But again you get that street name issue again so good luck proving you own it if your brokerage has a problem.
Gold ETFs are convenient and good for a portion of your gold holdings if you want easier rebalancing. But if you want to hold gold overseas you’re going to need to do something more robust to get the higher safety. This is just the reality of the situation. These overseas storage ETFs may be marginally better than the big guys of StateStreet GLD or iShares IAU, but ETFs are all going to have similar risks no matter what the marketing department has to say on the matter.
Where Can I Find Out More?
Glad you asked! Did I mention that overseas gold storage options for all persons (including Americans) will be covered in the upcoming book? Accounts from a minimum of a single gold coin in allocated storage up to millions in value will have options. What a coincidence! Sign up for the book here and we’ll discuss the options available that will be a more robust way to handle overseas gold allocations than using an ETF:
Permanent Portfolio Book Announcement List
Westwind vs Clikstand Trangia Alcohol Stove Stand and Trangia Thoughts
01 week ago
As a follow-up to my Westwind stand review, I do some performance tests on my tried and true Clikstand vs. the Westwind vs. the mini-Trangia system.
In this review I take ideal indoor conditions and compare performance times to boil 16 ozs. of water. My findings are that the Westwind when run *upside down* is near identical performance to the excellent Clikstand system. When used with a windscreen, both of these systems provide outstanding lightweight performance with the Trangia stove.
The Trangia mini is a neat nesting pan system with simple burner. However the performance is just average. Although I do give it credit for a good all-in-one contained system and decent weight. It is also a good value.
For the money the Westwind stand is a really good deal especially when you buy it with the Trangia burner. Add a cheap aluminum flashing or foil wind screen and you’ll get really good performance for under $25 at most stores!
If you add in the Evernew 0.9L ultralight titanium pot you’ll have a complete cook system for about 10-11 ozs. of weight. This is for a rugged Trangia (4 oz.), simple stand (2.7 oz.) and a good versatile pot (4 oz.).
Sound like a good setup? It is. You can help support my work by ordering one from my Amazon store. 
Thanks for your subscription and comments. If you want to see other gear reviewed or have further questions, send me a note. See you on the trail!
Trangia Westwind Alcohol Stove Stand Review
01 week ago
This review is for the simple and lightweight Liberty Mountain Westwind Trangia stove stand. This three piece aluminum stand packs flat and weighs 2.8 ozs. The stand connects together quickly and securely. It holds the Trangia burner and most pots securely. The three point contact with the ground means it will be stable even on rough surfaces.
This stand is shown often with the Trangia burner set in the top section. However a tip I saw online a while back suggested using it upside down (from YouTuber “TheBeebopper”).
This tip has you put the Trangia burner on the ground first and then set the stand over it. In this video I test it both ways to see how much of a difference it makes. And yes, it does make a big difference!
For a price around $20 you get the Trangia burner and the stand. This will give you a cook system around 6-7ozs. very inexpensively to use with your own pans. I like this little stand as an inexpensive and lightweight hiking stove and have used it many times on multi-night and day hikes for hot drinks and food on the trail.
You can find this stand listed in my Amazon store as well as larger Trangia systems for more elaborate cooking needs:
http://www.crawlingroad.com/store
The Trangia stove (in various configurations) is a simple and reliable system that I’ve been using for over a decade. It won’t let you down!
Thanks for watching and your support!
Index Funds and IPOs
3A poster on the forum brought up a great question on whether index funds would be forced to buy the upcoming Facebook IPO. The worry is that the index funds will load up on the IPO and take a loss later as the IPO price comes back down to Earth.
No, this isn’t likely to happen.
IPOs are, for the uninitiated, one of the worst investments to buy. The company and investment bankers hold all the cards. They set the date for the offering, set the price, set the shares to be issued, grease the skids with brokers by allowing some early access (which they’ll dump after the price goes up), etc. Never buy IPOs no matter how tempting the media hype says they are.
So why won’t the index funds go out and load up on a big IPO like Facebook? Well, they have entry requirements for the most part. The S&P index formulation requires IPOs not only be listed for a certain period of time (6-12 months), but also have a certain number of profitable quarters before they would be added. These guys weren’t born yesterday!
From Standard and Poor’s Eligibility Requirements starting on Pg. 5
Specifically, these two points will keep most of the IPO hype at bay:
Financial Viability. Usually measured as four consecutive quarters of positive as- reported earnings. As-reported earnings are Generally Accepted Accounting Principles (GAAP) net income excluding discontinued operations and extraordinary items. For REITs, financial viability is based on both as-reported earnings and Funds From Operations (FFO). FFO is a measure commonly used in REIT analysis.
Another measure of financial viability is a company’s balance sheet leverage, which should be operationally justifiable in the context of both its industry peers and its business model.
Treatment of IPOs. Initial public offerings should be seasoned for 6 to 12 months before being considered for addition to an index.
The index funds are not going to load up on Facebook when they go public (or they shouldn’t!). This is actually another good reason to own index funds and not actively managed funds that do not have these screening rules before buying stocks. Index funds still remain the single best way to own exposure to the stock market.
Now, if you really want to own a new IPO company for your variable portfolio (for money you can afford to lose), then let it just simmer for about six months and then buy into it. By then the price normally will have settled (usually lower) and you’ll have a better chance of making a profit.
EDIT: The Finance Buff asked about other indices like Russell 3000 and Wilshire 5000. These indices are more lax than S&P and will reformulate and bring in IPOs sooner. However they still have a lag time and it is not likely they will be going out and immediately bring in Facebook IPO based on their formulation criteria which I list below:
Russell Index Formulation and Methodology
Russell lists out the specifics on how IPOs are added beginning on Pg. 8.
Wilshire has their methodology here. They will do monthly, but it doesn’t look like the Facebook IPO is going to be snapped up immediately either:
In the past when someone asked what Small Cap value fund to use of Russell 2000 vs. S&P 600 for instance I would steer them towards the S&P versions because of their more sane screening process to weed out IPOs. I think S&P’s handling of IPOs is a smarter way to do it vs. their competitors.
Governments Like Inflation
52 weeks ago
Let’s talk about Treasury Inflation Protected Securities (TIPS) again. It’s no secret that I dislike them vs. gold in the Permanent Portfolio. But will they ever “default” as some say? No, they won’t. But this doesn’t mean they don’t have other serious problems.
I don’t believe the US will ever default on its debt because they control the money it is denominated in. They can simply print money to pay it all off. Not a good thing, but technically not a default. If you own $10,000 in TIPS and the Treasury hands you a $10,000 bill in the future they technically paid off the obligation. Of course the money may be worthless, but you did get paid back as stated in the agreement.
Now, what causes inflation? Inflation across an entire economy is caused by politics, not economics. It’s different than a shortage of a crop like corn that cause prices to spike in that one area. Inflation as a policy makes all prices go up together. This is a unilateral truth if you look at financial history.
Therefore, the idea of relying on the government causing the inflation to protect you from the inflation is a really bad idea. If the government really cared about protecting you from inflation they would implement monetary policies that balanced the demand for new money each year with the supply so inflation was 0% +-. But that’s not what they do. They target 3-4% inflation and often get it wrong and all sorts of things happen as a result.
Governments like inflation. They have no desire to protect their citizens from inflation or they wouldn’t use it as a monetary policy at all.
What does this mean? Simple:
Governments like inflation. They have no desire to protect their citizens from inflation or they wouldn’t use it as a monetary policy at all.
Why buy a product like TIPS from an entity that is actively working against your interests behind the scenes?
Even the much vaunted “independence” of the Fed is an illusion. Enormous pressure can be put on the Chair of the Fed to react in certain ways. I really enjoyed this paper for instance that discussed the Nixon tapes and the pressure put on Fed Chair Arthur Burns. Nixon wanted an easy money supply for political reasons at the risk of sending inflation even higher and it appears Burns complied. The taped quotes are interesting:
How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes
What’s the lesson from this (and likely other manipulations by later administrations)? Well it’s that true inflation protection is not going to be gained by trusting the people with their hands on the printing press.
TIPS may be wonderful if inflation is low and steady. But I have a very difficult time believing they are going to do any better than a simple short-term Treasury fund in terms of offering inflation protection under higher rates. In other words, they are very likely to just tread water or probably lose a little each year in the game of catch up if bad inflation comes to the US.
Don’t buy TIPS for the Permanent Portfolio. Gold is immune from a lot of political shenanigans that can affect the actual reporting of inflation and subsequent inflation adjusted payments. There’s nothing wrong with keeping 25% of your wealth in a form of money (gold bullion) that is not subject to the whims of those in power.
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